Corporate Finance Project – Term II

Study of Dividend Characteristics

Across Industries in India

Presented By: Group 5

Alok Pratap Singh 23NMP05

Amit Sukhija 23NMP08
Chandan Kumar
23NMP12
Manoj Kumar
23NMP18
Rahul Niranwal 23NMP23
Siddhartha Bhargava 22NMP30
 INDEX

1. ABSTRACT.....................................................................................................................3
3 REVIEW OF LITERATURE AND RESEARCH HYPOTHESES................................6
3.1 Literature Review......................................................................................................6
3.2 Research Hypotheses..............................................................................................11
3.3 Key Variables that may affect the Dividend Behavior of a Firm...........................12
3.4 Data and Sample.....................................................................................................12
3.4.1 Power Sector:....................................................................................................13
3.4.2 IT Sector:..........................................................................................................13
3.4.3 FMCG Sector:...................................................................................................13
4. OBSERVATIONS ON OUTPUT.................................................................................15
5. CONCLUSION..............................................................................................................15
5. EXHIBITS.....................................................................................................................17
Exhibit 1: Dividend behavior of Power Sector Companies...........................................17
Exhibit 2: Dividend behavior of IT Sector Companies.................................................20
Exhibit 3: Dividend behavior of FMCG Sector Companies..........................................21

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Corporate Finance–Group 5 Dividend Behavior 2
1. ABSTRACT

Dividend decision refers to the policy that the management formulates

in regard to distribution of the earnings, as dividends, to shareholders.
Dividend decision determines the division of earnings between
‘Payments to Shareholders’ and ‘Retained Earnings’. The dividend
decision is an important part of the present day corporate world and is
an important for the firm as it may influence the capital structure and
stock price of the firm. Profitability has always been considered as a
primary indicator of dividend payout decision. But there are numerous
other factors that may also affect the dividend decision of the firm. The
idea of this study is to identify these factors; to see the affect of these
factors on dividend behavior across different industries; and to find out
any correlation among these factors across industries. The other idea
is to study the industries that are at different stages (phases) of growth
cycle i.e. Growing, Stable, Matured stages and to see the differences in
the dividend payout behavior among these different industries.
We have taken three industries for under this project work, namely –
Power, IT and FMCG. We have taken 5 to 6 firms in each Industry as
representative of each Industry. Technique used for analysis is multiple
regression and Co-relation Matrix. We carried out the analysis at firm
level and then at Industry level by aggregation.
Prior to our analysis in this report, we have cited certain literature
reviews and their approaches that have been used in indentifying
dividend behavior & characteristics of various industries.

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Corporate Finance–Group 5 Dividend Behavior 3
2. INTRODUCTION

Dividend payout decision is a critical decision area and it is one of the

most important financial policies decision, not only from the viewpoint
of the company, but also from that of the shareholders and other
stakeholders such as the employees and regulatory bodies. If these
decisions are handled efficiently, the results are expected to be
reflected in value of firms. More importantly, analysis of dividend policy
is useful in enabling policymakers to identify the success or failure of
policy initiatives or, alternatively, highlight different strategies
undertaken by companies, which contribute to their successes.

The questions of "Why do corporations pay dividends?" and "Why do

shareholders, consumers, employees, government and regulatory
bodies pay attention to dividends?" have puzzled both academicians
and corporate managers for many years. Some researchers have
developed and empirically tested various models to explain dividend
behavior. Other researchers have surveyed corporate managers and
institutional investors to determine their views about dividends.
Despite much research intended to resolve the dividend puzzle,
dividend policy remains one of the most judgmental decisions that a
manager must make.

Dividend decisions may enhance the market value of the company but
on the other hand it may mean less availability of internal funds and
more dependence on external sources and expansion purposes.
Furthermore, while determining dividend payment, a prudent
management strikes a balance between shareholder's expectation and
firm's long term interest. Dividend policy decision is affected by many
factors. These factors may substantially vary from country to country.

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Corporate Finance–Group 5 Dividend Behavior 4
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Corporate Finance–Group 5 Dividend Behavior 5
3 REVIEW OF LITERATURE AND RESEARCH HYPOTHESES

3.1 Literature Review

Several theories have emerged to explain why firms pay dividends.

These include agency cost reduction, clientele preference for dividend
income, and signaling of current or future cash flows. A number of
researchers have provided insights, theoretical as well as empirical,
into the dividend policy puzzle.

Lintner (1956) was one of the pioneers in studying corporate dividend

behavior of 28 well-established industrial companies for the period of
1947-1953 by using a regression analysis and intensive interviews with
managers responsible for the dividend decisions. Lintner found that
major changes in earnings "out of line" with existing dividend rates
were the most important determinant of a company's dividend
decisions, and concluded that a major portion of dividend of a
company would be expressed in terms of company's desired dividend
payment and target payout ratio. However, because managers
believed that shareholders prefer a steady stream of dividends, firms
tended to make periodic partial adjustments toward a target payout
ratio rather than dramatic changes in payout. Therefore, managers
smooth dividends in the short run to avoid frequent changes.

Miller and Modigliani (1961), viewed dividends as irrelevant and they

argue that given perfect capital markets, the payment of dividends
does not affect the value of the firm and is therefore irrelevant. In such
a world, firm value depends only on the distribution of future cash
flows that result from the investments undertaken. Miller and

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Corporate Finance–Group 5 Dividend Behavior 6
Modigliani concluded that the value of company depends solely on its
earnings power and is not influenced by the manner in which its
earnings are split between dividends and retained earnings.

Researchers took different paths in identifying factors that influence

dividend policy decisions. Some took a normative approach and
developed theories about how companies should make dividend policy
decisions. Others, who took a behavioral approach, went directly to
managers and asked them what they actually consider when making
such decisions. Comparing the responses from various surveys to the
theoretical models provided a way of determining whether managers
make dividend decisions in a manner consistent with academic theory
(Baker et al, 2001). Most researchers and many academics greeted
Miller and Modigliani conclusion with surprise because the conventional
wisdom at the time suggested that a properly managed dividend policy
had a significantly positive impact on share prices and shareholder
wealth. For example, Bernstein (1996) stated that "... dividends, in and
of themselves, do not matter, provided managers avoid driving down
the spread between return on earnings and the cost of capital."

Fama and Babiak (1968) studied the determinants of dividend

payments by individual firms during 1947-1964. The authors used a
regression model analysis, simulations and prediction statistical tests.
Fama and Babiak found that net income seems to provide a better
measure of dividend policy than either cash flow or net income and
depreciation. Fama (1974) examined other models for explaining
dividend behavior. Fama and Babiak (1968) and Fama (1974) results
support Lintner's view that managers prefer a stable dividend policy,
and are reluctant to increase dividends to a level that cannot be
sustained. Therefore, these researchers concluded that changes in per

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Corporate Finance–Group 5 Dividend Behavior 7
share dividends are largely a function of a target dividend payout
based on earnings and the last period's dividend payout.

Murray (1981) by using non-capital market data to test the theoretical

implication that dividend payout is negatively correlated with earning
uncertainty. Murray concluded that earning uncertainty is a
determinant of the dividend policy. Baker et al. (1985) and Farrelly et
al. (1986) surveyed 562 New York Stock Exchange (NYSE) firms. Based
on their analysis of 318 responses from utility, manufacturing, and
wholesale/retail firms, they found that the major determinants of
dividend payments were the pattern of past dividends and the
expected future earnings. The results also show that managers were
highly concerned with dividend continuity and believed that dividend
policy affects share value. Kim (1987) examined the effect of
transaction costs and agency costs on dividend policy of 357 industrial
firms during 1979-1981. The cross-sectional tests of the models related
dividend payout ratios to explanatory variables such as past and
expected future growth of firm, the total risk of firm and the number of
stockholders. Kim concluded that transaction costs and agency costs
effect firm's dividend payout decision. Bond and Mougoue (1991)
examined whether the speed of adjustment and target dividend payout
rates implied in the partial adjustment model are an accurate
characterization of corporate dividend policy. Bond and Mougoue
conclude that the partial adjustment model does not generate unique
measures of the dividend policy of the individual firm.

Pruitt and Gitman (1991) surveyed financial managers of the 1,000

largest US firms about the interplay among the investment, financing,
and dividend decisions in their firms. Their results suggest that
important influences on the amount of dividends paid are current and

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Corporate Finance–Group 5 Dividend Behavior 8
past years' profits, the year-to-year variability of earnings, and the
growth in earnings. Pruitt and Gitman also found that prior years'
dividends are an important influence on current dividends. Sharma and
Rao (1992) tried to identify the signaling aspects of firm's dividend
payout decision. They concluded that dividends are perceived as
signals from performance point of view, market's point of view and
management's point of view. Simon (1994) studied the determinants of
dividend payments by U. S. firms during two years 1984 and 1985.
Simon reevaluated Lintner's model with new independent variables
related to cash flows. His results support Lintner's view that changes in
per share dividends are largely a function of a target dividend payout
based on earnings and the last period's dividend payout. However,
Simon found no relationship between cash flows and dividend policy.

Benartzi et al. (1997) by conducting a comprehensive study concluded

that Lintner's model of dividends remains the best description of the
dividend setting process available. Baker et al. (2001) study reports
the results of a 1999 survey of 630 NASDAQ-listed firms. Based on
their analysis of responses from 188 managers about the importance
of 22 different factors that influence their dividend policy, they found
that many managers of NASDAQ firms make dividend decisions
consistent with Lintner's (1956) survey results and model. Their results
also show significant differences between the manager responses of
financial and non-financial firms on nine of the 22 factors. Their results
also suggest that managers pay careful attention to their choice of
dividend policy for their firm. They conclude that because the dividend
decision can affect firm value and, in turn, the wealth of stockholders,
dividend policy is worthy of serious management attention.

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Corporate Finance–Group 5 Dividend Behavior 9
Fama and French (2001) examine the characteristics of dividend
paying companies. They find that three characteristics affect the
decision to pay dividends: firm size, profitability, and investment
opportunities. They note that larger firms and more profitable firms are
more likely to pay dividends, whereas firms with more investment
opportunities are less likely to pay dividends. Narasimhan and
Vijayalakshmi (2002) analyze the influence of ownership structure of
Indian firms on dividend payout and find no influence of insider
ownership on dividend behavior of firms. Li, Feng, Song and Shu (2006)
analyzed the decision-making of dividend policy and the reasons for
dividends policy selection in non-state-owned listed companies in
China by using structural equation modeling. The main research
findings are as follows: (1) the dividend policy of non-state-owned
listed companies in China can be interpreted by the western agency
theory for dividend, and they found that if compared with manager,
owner is a more important variable that influence the dividend policy,
(2) four motives such as investment opportunities, refinancing ability,
stock price and potential repayment capacity are all important factors
for decision maker to determine the dividend policy.

Brunarski et al. (2004) examine the relation between agency costs and
the firm's decision to distribute excess cash to shareholders by
declaring a nonrecurring special dividend or by significantly increasing
the firm's regular dividend. The evidence supports the notion that firms
with greater agency costs are more likely to pay a special dividend,
whereas firms with lower agency costs are more likely to increase their
regular dividend. Dhanani ( 2005) by using a survey approach
examines the importance and relevance of the various theories of
dividend policy for UK companies, and evaluates the extent to which
firm characteristics such as size and industry sector influence

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Corporate Finance–Group 5 Dividend Behavior 10
corporate managers' views about the various dividend theories. The
results in general support dividend hypotheses relating to signaling
and ownership structure, in preference to those about capital structure
and investment decisions and agency issues. At a more detailed level,
the cross sectional analysis reveals important differences between
managers' responses, based on company size, industry sector, growth
opportunities, ownership structure and information asymmetry.

3.2 Research Hypotheses

The primary purpose of this project is to identify the factors influencing
cash dividend change across different Industries in India. The
Industries undertaken for study are:
1. Power Sector
2. IT Sector
3. FMCG Sector

Above Industries have been selected as they reflect the different life
cycle stages. Power Sector has been growing in past decade, while
FMCG is at a mature stage. IT Industry has been more towards a stable
state in recent past. Therefore, these three industries shall provide us
a better understanding of dividend behavior across different Industry
stages.

In order to study the dividend behavior, following companies from each

Industry has been shortlisted:
Power Sector IT Sector FMCG Sector
NTPC Limited Infosys Technology HUL
NHPC Limited HCL Technology P&G
Neyveli Lignite Wipro Limited Nestle
Corporation
Tata Power NIIT Limited ITC
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Corporate Finance–Group 5 Dividend Behavior 11
Torrent Power TCS Limited Dabur
Power Grid
Corporation of India
Ltd.

The data for these companies have been collected for last 10 years
(i.e. 2001 to 2010) and have been analyzed.

3.3 Key Variables that may affect the Dividend Behavior of a

Firm
The variables that have been identified to have an effect on dividend
behavior include the following:
Y= Dividend Payout (%)
X1=PAT (Current Year)
X2= Earning From Share
X3= Cash Flow
X4= P/BV ratio
X5= Last Year Dividend (%)

3.4 Data and Sample

In order to study the aforesaid behavior, we have collected the data for
last ten years for above variables for the companies under study.
[Source of Data: Prowess Database, capitaline.com]

Data Analysis
We have used multiple regression method to study the correlation
between Dividend payout and each of other independent variables (as
mentioned above). We have studied the behavior of individual companies
and then it has been aggregated at the industry level. This has been
repeated for each industry separately. The following correlation
matrices represent the relationship among different variables:

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Corporate Finance–Group 5 Dividend Behavior 12
3.4.1 Power Sector:

1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.8536 1.0000
3 Cash Flow 0.9787 -0.9280 1.0000
4 ( P/BV) 0.9166 -0.8108 0.9172 1.0000
Last Yr Div
5 (%) 0.9635 -0.8170 0.9582 0.8893 1.0000

Y Dividend (%) 0.9672 -0.8110 0.9448 0.9346 0.9530

3.4.2 IT Sector:

1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.1372 1.0000
3 Cash Flow 0.9801 0.0147 1.0000
4 ( P/BV) -0.5967 -0.0349 -0.6115 1.0000
Last Yr Div
5 (%) 0.2343 -0.7181 0.1097 -0.2992 1.0000

Y Dividend (%) 0.0189 0.3003 -0.0033 -0.3936 -0.0182

3.4.3 FMCG Sector:

1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.0386 1.0000
3 Cash Flow 0.8569 0.2638 1.0000
4 ( P/BV) 0.8429 -0.2606 0.5182 1.0000
Last Yr Div
5 (%) 0.8938 -0.0478 0.7946 0.8402 1.0000

Y Dividend (%) 0.9054 0.2696 0.7679 0.8235 0.8416

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Corporate Finance–Group 5 Dividend Behavior 13
The Analysis of individual companies and the associated data has been
attached in the Exhibits (Exhibit1 to Exhibit3)

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Corporate Finance–Group 5 Dividend Behavior 14
4. OBSERVATIONS ON OUTPUT
From the output of above Correlation matrices, we note the following
correlation of dividend payout with the variables under study:

Power Sector IT Sector FMCG Sector

Profit (+) ve (+) ve (+) ve correlated
correlated correlated
EPS (-) ve (+) ve (+) ve correlated
correlated correlated
Cash Flow (+) ve (-) ve correlated (+) ve correlated
correlated
P/BV ratio (+) ve (-) ve correlated (+) ve correlated
correlated
Last Yr (+) ve (-) ve correlated (+) ve correlated
Dividend correlated

Ranking of correlated variables:

Power Sector IT Sector FMCG Sector
1 Profit (+0.9672) EPS (+0.3003) Profit (+0.9054)
2 Last Yr Div (+0.9530) Profit (+0.0189) Last Yr Div (+0.8416)
3 Cash Flow (+0.9448) Cash Flow (- P/BV (+0.8235)
0.0033)
4 P/BV (+0.9346) Last Yr Div (- Cash Flow (+0.7679)
0.0182)
5 EPS (-0.8110) P/BV (-0.3936) EPS (+0.2696)

5. CONCLUSION
Power Sector: It can be concluded from the existing variables, that the
dividend payout of the power sector firms have high degree of co-relation
with Profit, Cash Flow and Last Year’s Dividend. On further observation, it
can be noted that industry profit is also highly co-related (+0.9787) with
Cash Flows, meaning the industry has no trouble in realizing in profits into
Cash. The average payout of the Power sector during this period was

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Corporate Finance–Group 5 Dividend Behavior 15
25.45%. This is because, the industry presented immense growth
opportunities for the companies hence retained earning can provide the
investors better returns if they plough back the earnings into business.
The dividend policy of power sector is also highly co-related with last
year’s dividend payout (+0.9530). This dividend behavior can be
attributed to the industry’s consideration for its clientele base. In order to
meet the needs of firms and investors, management thinks that it is not
right decision to change the dividend policy because it would provoke
their investors to switch.
The Negative Co-relation of Dividend Payout with EPS (-0.8110) indicates
the industry has been increasing the number of shares (either by issuance
of fresh shares of by splitting of shares) during this period so as to make
EPS (PAT/no. of shares) negatively co-related with dividend payout (%)

IT Sector: For the IT sector, it can be concluded from the study that
none of the variables selected as per literature explain the dividend
payment pattern for IT industry. There is some correlation with EPS (+
0.3003) and P/BV ratio (- 0.3936), but that is also not highly significant.
Though the period selected for study includes data for last ten years and
includes both recessionary as well as booming period for IT industry. Till
2003 the industry was in recession and after that industry witnessed
exponential growth till 2006. Afterwards the growth is more linear and this
industry is now seen as moving towards maturity. Before 2003, IT industry
was towards the bottom of the list in terms of dividend payment. The
average payout of this sector was around 22%. There are two reasons
assumed for this behavior. Firstly, the industry presented immense
growth opportunities which led the managers believe that if they plough
back the earnings into business, they can provide the investors better
returns. Secondly, most firms in the industry were facing volatile earnings
streams which deterred them from paying more dividends. But after this
period, the situation changed and dividend payout by IT companies
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Corporate Finance–Group 5 Dividend Behavior 16
increased tremendously. Infosys technologies paid as high dividend as
2590% in the year 2004. This surge in dividend can be attributed to high
profitability and subsequently high liquidity of IT companies and industry
movement towards maturity. As IT sector is human intensive sector, it
does not require huge capital asset base like manufacturing companies
for their operations, so these firms can easily release funds for payment of
dividends. Thus, we can conclude that IT industry in India have high
liquidity and profitability and IT firms can pay huge dividends even if there
is year to year variability in earnings of the firm.

FMCG Sector: From the result of FMCG sector It can concluded that the
dividend payout of the FMCG sector firms have high degree of correlation
with Profit, last Year’s Dividend and P/BV ratio. FMCG sector is considered
to be a matured sector; result of our study is also reflecting the same
dividend behavior. The profit is consistent in this sector and dividend is
also more or less consistent, it shows that the industry has passed the
earnings to the shareholders in the form of dividend. One of the reasons
for this may be that the industry is matured and growth has been
stabilized.

5. EXHIBITS

Exhibit 1: Dividend behavior of Power Sector Companies

NHPC
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.7340 1.0000
3 Cash Flow 0.9641 -0.6734 1.0000
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Corporate Finance–Group 5 Dividend Behavior 17
 4 ( P/BV) 0.8990 -0.3988 0.9037 1.0000
Last Yr Div
5 (%) 0.8273 -0.9380 0.7570 0.5027 1.0000

Y Dividend (%) 0.9857 -0.7878 0.9401 0.8327 0.8831

NLC
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.8033 1.0000
3 Cash Flow 0.2597 -0.0887 1.0000
4 ( P/BV) 0.4796 0.4342 0.7520 1.0000
Last Yr Div
5 (%) 0.0559 -0.1547 0.6996 0.5413 1.0000

Y Dividend (%) 0.5228 0.3677 0.6176 0.8431 0.5216

NTPC
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.9729 1.0000
3 Cash Flow 0.8435 0.8534 1.0000
4 ( P/BV) 0.6881 0.6129 0.8190 1.0000
Last Yr Div
5 (%) 0.9376 0.8888 0.9466 0.8575 1.0000

Y Dividend (%) 0.9599 0.9443 0.9494 0.8270 0.9846

PGCIL
1 2 3 4 5
Profit EPS Cash ( P/BV Last Yr

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Corporate Finance–Group 5 Dividend Behavior 18
 Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.8667 1.0000
3 Cash Flow 0.9800 -0.8363 1.0000
4 ( P/BV) 0.9056 -0.7934 0.8932 1.0000
Last Yr Div
5 (%) 0.9549 -0.8848 0.9302 0.8378 1.0000

Y Dividend (%) 0.9517 -0.8368 0.9158 0.8156 0.9784

TATA Power
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.8044 1.0000
3 Cash Flow 0.1672 -0.1222 1.0000
4 ( P/BV) 0.6947 0.8229 0.0974 1.0000
Last Yr Div
5 (%) 0.8671 0.9470 0.1067 0.8875 1.0000

Y Dividend (%) 0.8788 0.9555 0.0755 0.8759 0.9865

Torrent Power
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.6427 1.0000
3 Cash Flow 0.9933 0.6418 1.0000
4 ( P/BV) 0.8178 0.6883 0.8185 1.0000
Last Yr Div
5 (%) 0.0314 0.0768 0.0331 -0.2732 1.0000

Y Dividend (%) 0.5213 0.8968 0.5323 0.4949 0.2560

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Corporate Finance–Group 5 Dividend Behavior 19
Exhibit 2: Dividend behavior of IT Sector Companies
CMC
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.9999 1.0000
3 Cash Flow 0.9641 0.9629 1.0000
4 ( P/BV) -0.4956 -0.4923 -0.5430 1.0000
Last Yr Div
5 (%) 0.9370 0.9346 0.9638 -0.5106 1.0000

Y Dividend (%) 0.9817 0.9802 0.9822 -0.4998 0.9767

HCL
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.3915 1.0000
3 Cash Flow 0.7072 0.1066 1.0000
4 ( P/BV) -0.0947 0.3618 -0.1180 1.0000
Last Yr Div
5 (%) 0.6931 0.2531 0.2234 -0.0480 1.0000

Y Dividend (%) 0.1894 -0.2100 -0.0374 -0.2326 0.7787

Infosys
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.4418 1.0000
3 Cash Flow 0.9875 -0.3417 1.0000
4 ( P/BV) -0.7644 -0.0046 -0.7685 1.0000
Last Yr Div
5 (%) 0.0099 -0.3266 -0.0989 -0.0523 1.0000

Y Dividend (%) -0.1860 0.6976 -0.1461 -0.1252 -0.1772

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Corporate Finance–Group 5 Dividend Behavior 20
 NIIT
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.9420 1.0000
3 Cash Flow 0.6962 0.6657 1.0000
4 ( P/BV) 0.7567 0.7138 0.2388 1.0000
Last Yr Div
5 (%) -0.4982 -0.6482 -0.6613 -0.0902 1.0000

Y Dividend (%) -0.5151 -0.6139 -0.7290 -0.0895 0.9739

Wipro
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.3190 1.0000
3 Cash Flow 0.9321 -0.2048 1.0000
4 ( P/BV) -0.6742 0.2570 -0.7493 1.0000
Last Yr Div
5 (%) 0.0671 -0.4378 -0.0342 -0.1750 1.0000

Y Dividend (%) -0.0746 0.2132 -0.1067 -0.2017 -0.0831

Exhibit 3: Dividend behavior of FMCG Sector Companies

Dabur
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)

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Corporate Finance–Group 5 Dividend Behavior 21
 1 Profit 1.0000
2 EPS 0.5959 1.0000
3 Cash Flow 0.9072 0.5073 1.0000
4 ( P/BV) 0.7841 0.3393 0.4948 1.0000
Last Yr Div
5 (%) 0.4571 0.3050 0.1232 0.8410 1.0000

Y Dividend (%) 0.3522 0.6731 0.1299 0.5038 0.6839

HUL
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.7728 1.0000
3 Cash Flow 0.7877 0.6172 1.0000
4 ( P/BV) 0.4007 0.1422 -0.0567 1.0000
Last Yr Div
5 (%) 0.8007 0.4340 0.6824 0.4952 1.0000

Y Dividend (%) 0.5429 0.4464 0.0748 0.8726 0.5843

ITC
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS -0.7096 1.0000
3 Cash Flow 0.8622 -0.8593 1.0000
4 ( P/BV) 0.5853 -0.7377 0.6123 1.0000
Last Yr Div
5 (%) 0.9516 -0.7303 0.8966 0.6566 1.0000

Y Dividend (%) 0.8522 -0.4279 0.6579 0.4984 0.7317

Nestle
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.9982 1.0000
3 Cash Flow 0.9189 0.9180 1.0000
4 ( P/BV) 0.9223 0.9119 0.8132 1.0000
5 Last Yr Div 0.9763 0.9736 0.9661 0.9115 1.0000

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Corporate Finance–Group 5 Dividend Behavior 22
 (%)

Y Dividend (%) 0.9896 0.9862 0.9365 0.8801 0.9691

P&G
1 2 3 4 5
Cash ( P/BV Last Yr
Profit EPS Flow ) Div(%)
1 Profit 1.0000
2 EPS 0.8318 1.0000
3 Cash Flow 0.4504 0.1941 1.0000
4 ( P/BV) 0.6469 0.4666 0.4675 1.0000
Last Yr Div
5 (%) 0.0745 0.0801 0.1574 0.0666 1.0000

Y Dividend (%) -0.1559 -0.0237 0.0413 0.2336 -0.4471

References:
1. Prowess
2. Capitaline.com
3. International Research Journal of Finance & Economics
4. Eurojournals.com

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Corporate Finance–Group 5 Dividend Behavior 23